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Karthik

Karthik

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06/17/2009

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1.
Total Revenue:-Total Revenue refers to the gross revenue of the firm. Inother words, it is the total amount of money that a firm receives from itssales proceeds.It is expressed as follows:-TR = f (Q)Where:-TR = Total RevenueQ = Total amount of the goods sold during a period of time.Thus total revenue is the function of total sales.Total revenue can be obtained when the quantity sold is multiplied bythe market price of the product.Thus, TR = Q
X
PWhere:-Q = Quantity soldP = Price per unit
2.
Average revenue:- It refers to revenue per unit. Average revenue is equalto total revenue divided by the number of units sold. It is expressed asfollows.AR = TR / QWhere:-AR = Average revenueTR = Total revenueQ = Out put3.Marginal Revenue:-Marginal revenue refers to the net addition made tothe total revenue by selling one more units. Thus it is the change in thetotal revenue resulting form a unit change in the output sold. It can beexpressed as follows.MR = TR
n
– TR
n-1
4.
Project Planning :- Project Planning involves conceding, Generating,Evaluating & selecting the most profitable investment. It is a plan forinvestment fund & these with
Determining the worthiness of investment project
Estimating rate of returns from these project.
Estimating the cost of capital & availability of capital funds.
5.
Perfect Competition
:- A type of market where there arelarge number of buyers and sellers and no buyer or sellerinfluences the market individually. Under perfect competitionthere is free entry and exit of all the firms. There is uniform priceunder perfect competition. All consumers pay the same price. It isnot realistic and it is an imaginary market.
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6.
Monopoly:-
Monopoly is a type of market in which there isonly one seller producing a commodity having no close substitute.Under monopoly the entry of new firms is strictly prohibited.
7.
Price Discrimination:-
Price discrimination refers to a situation when a monopolist charges different prices from differentcustomers for the same commodity at the same time.E.g. BEST charges different prices for consumption of electricity fordomestic use and commercial use.Price discrimination is possible only under the followingconditions.a.The seller is a monopoly firm. b.There are 2 or more than 2 markets for the product
c.
No resale

possibility for monopoly product.

8.
Product Differentiation: Product differentiation is the mostimportant feature of monopolistic competition. Since allsellers sell the product which are perfect substitutes for eachother, they go for product differentiation. Every seller makesefforts to show that his product is superior to other products.Product differentiation is practiced in many forms limeadvertisement, brands, trademarks, designs, packaging, colouretc. Thus the products are not homogeneous undermonopolistic competition.
9.
Dumping
: - Dumping is a device used by the seller to promoteexport and capture foreign market. It refers to the sale of goods inforeign market at a given price which is lower than the selling priceof the same product in the domestic market.Dumping can be practiced under the following conditions only:-
The seller enjoy monopoly in domestic market and
There is perfect competition in the foreign market.
The two different market should have different elasticity of demand.
10.
Production cost
:- Production cost refers to all the expenses met by the producer in order to produce and shift it to the consumer.Production cost helps to expand supply. It is met by allcommodities which are produced and sold.
11. Selling cost
:- Selling cost refers to only that cost which is incurred tosecure demand. For e.g. expenses on demand. Advertisement,publishing, window, display etc. Selling cost promotes demand andthereby sales. Selling cost is met by all commodities which are sold
.
Q
.
Explain the relationship between price, average revenue andmarginal revenue under perfect completion and monopoly.
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Ans.a.Price and revenues under Perfect Competitions. A firm can sell any amount of the product under the givenprice in perfect competition. As the price is given and fixed, theaverage revenue and marginal revenue become equal to price.The following schedule explains the relationship betweenprice, average revenue and marginal revenue.
Units of commodityPrice TR(Rs.)MR(Rs.)AR(Rs.)123451010101010102030405010101010101010101010
Under the conditions of perfect of competition, the firm’saverage revenue and the marginal revenue curve would be oneand the same. In other words they are identical and represented by a horizontal straight line parallel to X – axis.
b.
Price and revenues under monopoly:- As there is only onefirm under monopoly, it can adopt an independent policy andchange the price as it desires. As a result, the price does notremain constant in monopoly. Under such circumstances,the relationship between price and revenues would appear asfollows
.Units of commodityPrice TR(Rs.)MR(Rs.)AR(Rs.)123451098761018242830108642109876
As the price goes on changing, both the average and marginalrevenues continuously fall. However the fall in MR is faster than AR. A firm can sell more goods if it reduces the price.
YAR MR O XOut Put
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PriceRevenue